AMP terminates Eastlake gas-fired power plant deal with FirstEnergy

The plug has been pulled on a deal to build a gas-fired power plant at FirstEnergy Corp.'s existing coal-fired electric plant in Eastlake.

American Municipal Power, which had entered into an agreement with FirstEnergy to construct, own and operate the plant, said the project was terminated because of a changing financial climate.

In particular, automatic federal spending cuts made earlier this year, formally known as a "sequester," clouded the future of financing incentives that would have helped pay for the Eastlake plant, AMP said in a news release issued Tuesday. The project partners also were facing increased interest costs resulting from the sequester.

"This project had a lot of positives and some challenges, but the financial uncertainty today, on top of continued regulatory uncertainty, heavily impacted AMP's decision," said AMP President/CEO Marc Gerken.

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FirstEnergy and American Municipal Power had signed a nonbinding memorandum of understanding in November to build a gas-fired electric plant with four combustion turbine units capable of producing 873 megawatts.

The plant was described as a peaking facility, or one that would produce electricity during stretches of peak demand, such as on hot summer days.

AMP would have provided construction financing and was to own 75 percent of the generation output upon the plant's completion. FirstEnergy would have funded and owned the remaining 25 percent of the output.

The natural gas peaking facility was described as "a separate plant within a plant," by FirstEnergy spokesman Mark Durbin. He added that the agreement didn't have anything to do with the site's existing coal boilers.

FirstEnergy initially announced last year it would close the Eastlake coal-fired plant in September instead of updating the plant with costly, and required, new federal environmental standards.

However, PJM Interconnection, a regional transmission organization that monitors the reliability of the power grid for 13 states including Ohio, asked FirstEnergy to keep some of the Eastlake plant's five coal-fired boilers running through 2015 to keep power supply consistent.